Microsoft To Buy DATAllegro

Microsoft on Thursday announced plans to acquire data warehouse appliance maker DATAllegro, a move that would give Microsoft a foothold in the enterprise business intelligence market. Financial details were not disclosed.

Microsoft plans to retain most of DATAllegro's team, as well as its headquarters in Also Viejo, Calif., making it a "Center of Excellence" for data warehousing, the software maker said. Microsoft will continue to support current DATAllegro customers.

DATAllegro customers span such markets as retail, telecommunications and manufacturing. In building its appliances, the company has taken a technology strategy that makes it possible to optimize its hardware based on the needs of the installed software, Mark Beyer, a researcher for Gartner, said. DATAllegro appliances are typically used with Ingres' open source database, but could be easily be optimized for Microsoft's SQL Server.

Over the last few years, Microsoft has been improving SQL Server's capabilities as a data warehouse foundation for the software maker's business intelligence and reporting tools. While Microsoft has made steady progress, Oracle remains the biggest player in all segments of the market.

Nevertheless, Microsoft has grown among users of small and medium-size data warehouses, and claims SQL Server 2008 "delivers enterprise-class capabilities."

"The addition of the DATAllegro team and its technology will take our data platform to the highest scale of data warehousing," Ted Kummert, corporate VP of the Data and Storage Platform Division of Microsoft, said in a statement.

DATAllegro would give the software maker the tools it needs to move further upstream, Beyer said. "It's a way for them to retain their customers as they move into larger data."

The acquisition, however, would seem to make Microsoft a hardware vendor, which is the opposite strategy of Oracle. The latter vendor has established certification programs instead to certify hardware from Dell, Hewlett-Packard, and Sun Microsystems as optimized for Oracle data warehouses.

"That's a big question hanging in the air," Beyer said of Microsoft's acquisition. Because Microsoft makes consumer electronic devices, such as the Xbox videogame console and the Zune portable media player, the company is not "hardware ignorant."

"The question is, 'Are they going to become a hardware computing vendor?'," Beyer said.

While Microsoft has yet to address that issue, it's one it will have to explain to potential customers in time.

Revenue for Microsoft's SQL Server in 2007 grew at a rate of 14% over the previous year, which was faster than its principal relational database rivals IBM and Oracle, each with 13.3%, according to IDC. Nevertheless, Microsoft's revenue growth slowed from its red-hot 25% rate in 2005.

SQL Server gained about 14% in revenue in 2006 as well. Microsoft now has 18.5% market share, compared with 44.3% for Oracle and 21% for IBM, IDC said.